Back to top

Image: Bigstock

Pool Corp (POOL) Stock up 39% in Past Year: More Upside Left?

Read MoreHide Full Article

Pool Corporation (POOL - Free Report) is poised to benefit from its expansion initiatives, pent-up demand and robust base business. Also, focus on remodeling and replacement activities have been driving sales in the last few quarters.

In the past year, shares of Pool Corp have gained 38.8% against the industry’s decline of 46.6%. The price performance was backed by solid earnings surprise history. Pool Corp’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters. Earnings estimates for 2022 have moved up 7% in the past 60 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Driving Growth

Expansion Efforts: Pool Corp continues to focus on expansion initiatives to boost revenues. The company is foraying into newer geographic locations to expand in existing markets and launch innovative product categories to boost market share. It is trying to expand through various acquisitions. In 2021, the company boosted its pool distribution network with the addition of Pool Source in the Nashville market (April 2021) and Vak Pak Builders Supply in the Jacksonville market (June 2021). The company closed the acquisition of Porpoise Pool & Patio in December 2021. The acquisition comprises three businesses, including a distributor of swimming pool products, a chemical packaging operation and a franchisor of swimming pool retail stores with a coverage of 232 stores throughout Florida and 30 stores from franchise locations in Alabama, Georgia, Louisiana and Texas. Backed by its distribution network coupled with operational synergies, the company anticipates Porpoise Pool & Patio business to contribute approximately 5% to POOLCORP’s total revenues in 2022. The acquisitions and the new locations are likely to boost customer relationships and services, thereby enhancing the top line. Going forward, the company anticipates acquisitions in new locations to contribute 5-6% to POOLCORP’s revenue growth in 2022.

Zacks Investment Research
Image Source: Zacks Investment Research

Solid Base Business: The company is benefitting from the solid performance of its base business segment. In fourth-quarter 2021, the company’s Base Business segment contributed 95.7% to total revenues. During the quarter, revenues from Base Business increased 22.3% year over year to $990.7 million. Elevated demand for outdoor living products along with favorable weather conditions benefitted the company. The segment's operating margins increased 340 basis points year over year, backed by its supply-chain management initiatives.

Focus on Remodeling & Replacement Activities: Pool Corp continues to benefit from remodeling and replacement activities. During fourth-quarter 2021, building materials sales increased 20% year over year. The company is benefitting from strong demand in construction and remodel markets. Equipment and chemical sales increased 21% and 26% year over year, respectively, in the fourth quarter. The upside was primarily driven by solid demand for heaters, automation products and variable speed pumps. Meanwhile, chemical sales were primarily driven by inflation. The company believes that the flexibility of the new work-from-home norm is likely to act as a catalyst for investments in home improvements. Benefits from new products (such as automation and the connected pool) and strengthening of the southern migration are likely.

Upbeat Views: Given the company’s ability to drive organic growth and manage cost structure through execution and capacity creation, the company anticipates its 2022 earnings to rise 12-17% year over year. For 2022, Pool Corp expects adjusted diluted earnings per share (EPS) in the range of $17-$17.75. The company anticipates positive demand trends to continue in 2022.

Other Key Picks

Some other top-ranked stocks in the Consumer Discretionary sector include Funko, Inc. (FNKO - Free Report) , Bluegreen Vacations Holding Corporation (BVH - Free Report) and Marriott International, Inc. (MAR - Free Report) .

Funko sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have gained 0.8% in the past year.

The Zacks Consensus Estimate for Funko’s current financial-year sales and EPS suggests growth of 22.7% and 26.8%, respectively, from the year-ago period’s levels.

Bluegreen Vacations carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 425.1%, on average. Shares of the company have surged 63.4% in the past year.

The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s levels.

Marriott carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 11.7% in the past year.

The Zacks Consensus Estimate for Marriott’s current financial-year sales and EPS indicates growth of 40.3% and 73%, respectively, from the year-ago period’s levels.